FX Week Ahead: Jackson Hole, Eurozone PMI’s, UK GDP

The week ahead is poised to remain quiet with most of the economic releases focusing on the second-tier data. Therefore, the Jackson Hole Symposium which takes place every year will be the main highlight. The symposium is scheduled to begin on Thursday, and key highlights include speeches by the respective policymakers from the ECB and the Federal Reserve. Elsewhere, the UK’s second GDP estimates will be due on Wednesday while data from the US will include the core durable goods orders.

Here is a brief recap on what to expect from the currency markets in the week ahead.

Eurozone flash PMI’s for August

The week ahead is relatively quiet as far the eurozone is concerned. Preliminary or flash PMI’s for manufacturing and services sector will be released during the week. The data will offer a preliminary view of the economic activity in the respective sectors.

The eurozone economic recovery has been broadly consistent. Data released last week showed that the GDP expanded 0.6% on a seasonally adjusted basis compared to the previous quarter. On a year over year comparison, Eurozone GDP expanded 2.2% after rising 1.9% in the first quarter.

Although economic recovery in the eurozone is modest, the consistency continues to make traders build hawkish bets that the European Central Bank will proceed with tightening monetary policy, starting with tapering the bond purchases.

Last week also showed that inflation remained fairly stable, building the case for the ECB to announce its tapering plans as early as September.

Besides the flash PMI’s the German ZEW economic sentiment data will also be coming out this week. Forecasts point to a moderation in the data to 15.3, compared to 17.5 previously. The Eurozone ZEW economic data will also be released with expectations showing a decline to 34.2 compared to 35.6 previously.

Traders turn to the annual Jackson Hole Symposium

Traders turn their attention to the annual Jackson Hole symposium this week. Among the speakers at the event, the Fed Chair, Janet Yellen and the ECB Chief, Mario Draghi will be speaking.

Given the lack of any key economic events this week, the policymakers’ comments from Jackson Hole will most likely move the markets this week. The theme for this year’s event is titled, “Fostering a Dynamic Global Economy.” Traders will no doubt focus on the comments from the policymakers at this event although the theme slightly differs.

The Jackson Hole symposium is famous for the comments made by policymakers. This includes Mario Draghi who first made his “whatever it takes” speech in 2014. Draghi pitched the idea for monetary policy to support the economic recovery. It was only a few months later that the ECB announced its massive bond purchase program at the rate of 60 billion euro per month.

With the ECB now expected to announce another round of tapering and eventually look towards winding down its bond purchases, the comments from the ECB chief will be read closely between the lines. This potentially exposes the euro currency to potential volatility as a result.

UK GDP expected to remain steady at 0.3% in Q2

The UK’s Office for National Statistics (ONS) will be releasing the second GDP estimates for the second quarter. Median forecasts point to an unchanged print at 0.3%. The UK’s economic activity grew slightly during the three months ending July. However, this was still historically a weak pace of expansion.

UK Q2 GDP: 0.3% (Preliminary Estimates). Source: Tradingeconomics.com

In the first quarter, the UK’s economy grew at a pace of 0.2%. Besides the GDP data, the business investment and public sector borrowing will also be coming out. On a quarterly basis, the UK’s business investment is expected to decline 0.1%. This comes after investment rose 0.6% in the previous quarter.

John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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